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Saturday, July 1, 2017

Frauds going up in number, banks need to tighten cyber security norms: RBI

The Reserve Bank of India flagged the rapid proliferation of frauds in the banking space over the last five years marking out a 19% increase in the number of fraudulent incidents and 72% increase in the value of the amount lost in the attacks. Around 86% of the frauds reported in 2016-17 was in the space of various credit accounts, said RBI.

The number of frauds went up to 5064 from 4235 and the value shot up to Rs 16770 crore from Rs 9750 crore over the last five years, said the central bank in the Financial Stability Report of 2017, released on Friday.

Holding the banks squarely responsible for such frauds, the regulator said that unlike macro economic risks on lending business of banks, frauds happen due to gaps in credit underwriting standards of banks.

“Some of the gaps are liberal cash flow projection at the proposal stage, lack of monitoring of cash flows, overvaluation, diversion of funds…,” said the RBI.

While highlighting the fact that digital payments have shown promising growth post demonetisation, the two biggest risks that the RBI found to the digitisation process emanates from a lot of people using digital payments without being aware of the risks involved and the risk banks face from third party technology vendors.

RBI has highlighted three major effects of a cyber attack, disruption of operations of a financial firm, fall of confidence in markets and damage the integrity of key data.

On the finance minister’s statement around creation of a CERT-Fin (Computer Emergency Response Team for financial services), the RBI said in the report that the working group that was created in March of this year has submitted its report and the regulator is considering it.

Source : Economic Times


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